So how did things get this bad for Greece? As IMF negotiator Poul Thomsen said of the country last year: "(Greece's) revenues have declined significantly, while spending, especially on wages and entitlements, has risen sharply." There you have it: the definitive formula for an economic meltdown.
One might think that would have been a wakeup call for Greece. Not so, apparently. Prime Minister George Papandreou -- a socialist, not surprisingly -- faced revolts, resignations and defections from within his own party last week. What exactly is he supposed to do? Shake out the couch cushions for spare change? The socialists broke the bank and there's nothing left to spend. Meanwhile, the IMF and Europe require the Greeks to prove they're making significant moves to get their house in order before handing over the next bailout installment.
The IMF initially recommended the following measures, which have already been adopted: cuts to Christmas, Easter and summer bonuses for workers in the public sector and state-owned enterprise. No raises in pensions or publicly funded wages for three years. Increased taxes on luxury items, tobacco and alcohol. And Greeks can no longer retire on a full pension at an average age of 61, having instead to wait until they're 63.
Now, the Greek government is set to increase sales taxes and sell government assets in an attempt to stay minimally afloat. The result? Riots in the streets.
The world is witnessing, in real time, the total collapse of a socialist system to the point that the conservatives are now ahead in the country's polls. But it's now a case of too little, far too late.
As Margaret Thatcher famously said, "Socialist governments ... always run out of other people's money." Greece was spending beyond its means by injecting cash into a public-sector system that wasn't producing anything of real value on which it could turn a substantial profit. When this system slid into the negative, Greece borrowed on credit until its credit rating tanked and it couldn't get loans like a regular country. So Greece tried a Hail Mary pass to Europe and the IMF, which are made up of countries borrowing money themselves on credit to manage their own debts.